Import customs valuation is the process customs authorities use to determine the value of imported goods for calculating import duties and VAT. The aim is to ensure the correct amount of tax is paid when goods enter a country.

Customs valuation follows a strict hierarchy of six methods, applied in order. Each method reflects a different way of establishing the value of goods for customs purposes.

Did you know? When importing goods into the UK, you must include all costs up to the point of entry at the UK border when calculating the customs value.

This means the value used for customs purposes may be more than just the amount you paid your supplier, especially depending on the Incoterm® used in your transaction.

For example:

• Under EXW (Ex Works), you’ll need to add the costs of transportation, loading, insurance, and any other charges up to the UK border.
• Under CIF (Cost, Insurance & Freight), many of these costs are already included in the supplier’s invoice.

It’s essential to understand how your chosen Incoterm® affects customs declarations, and avoid under-valuing your goods at import.

Need support with Incoterms® or customs valuation? The East Lancashire Chamber of Commerce is here to help.

The Six Methods of Customs Valuation

Method 1 – Transaction Value

This is the primary method. It’s based on the actual price paid or payable for the goods when sold for import, with certain adjustments. Importers should always first determine if an acceptable transaction value exists before considering other methods.

Method 2 – Transaction Value of Identical Goods

Used when the value of identical goods imported into the country around the same time is available. This method is practical mostly when the identical goods are declared on the same customs entry. Obtaining evidence can be difficult unless the importer or a related party has records.

Method 3 – Transaction Value of Similar Goods

Applies when goods are similar but not identical to those imported. Like Method 2, it requires evidence from goods declared on the same entry or records from related importers. This method is rarely used due to difficulty in obtaining suitable data.

Method 4 – Deductive Method

This method calculates customs value by deducting certain costs (such as transport and taxes) from the selling price of the goods in the country of importation. It’s typically used when goods are sold in the UK after import.

Method 5 – Computed Method

Based on the cost of production of the goods plus an amount for profit and general expenses. It is seldom used because it requires detailed cost documentation from the producer, usually in cases where the importer and producer/exporter are related.

Method 6 – Fallback Method

This is the last-resort method when none of the previous five methods can be applied. Customs uses reasonable means consistent with valuation principles, relying on available data to arrive at a fair value. The valuation must not be arbitrary or fictitious.

Understanding and applying the correct customs valuation method is crucial to ensuring compliance and avoiding costly delays or penalties.

If you’re unsure which method applies to your goods or need assistance with documentation, our customs specialists are on hand to help you

Call us today at 01254 356448 or email cds@chamberelancs.co.uk.

Get the guidance you need to import with confidence.